Wednesday, June 14, 2006



BusinessWeek: Is something seriously wrong in the global economy? The world's investors seem to think so. ... In fact, there hasn't been any breaking news about a braking world economy. What changed abruptly are expectations. Investors have suddenly decided that the world economy is in danger from one of two things: inflation, or overzealous efforts by the Federal Reserve and other central banks to combat inflation. People have jumped to the conclusion that the "overzealousness" was by the Fed. Instead, it seems to have been the BoJ. But of course, BoJ would have no credibility if the US were in control of it's finances. Since the US doesn't, meet the 700 pound gorilla in the room. Mark Hogan, also in Business Week: Indeed, some market watchers say concern about growth, not inflation, is what's actually roiling markets. " 'Growth fears' are driving the markets lower," Citigroup analyst Albert Richards wrote in a June 12 report. "The market seems to be thinking that growth (and earnings) may well suffer as a result of the inflation fight." What got my attention was the sentiments index of the futures market. . [Sorry. Image bloggered.] Now, I am too much 19th century to care much about futures. If Wall Street is a casino, futures trading is the slots.. And as more and more trading goes onto electronic autopilot, one can easy get panic buying and selling based on nothing more than what the slot machines are doing. The sentiment index is volatile. On 11/23, it was 159. The next trading day, 11/25, it was 259. On 11/28, it was 153. And apparently, it rose a few points after I downloaded the data shown above. But a good question to ask is the last time it was this weak. While it has waxes and waned, it hasn't been this weak since October 2002 (to see this, look at the 10 and 20 day moving averages). There's more than a whiff of panic in the air. And not one good reason, at least that the public has been given, for it.
Gas prices.
I wish it were that simple, Shrimplate. But big money people don't care about gas prices, except as they affect the consumer economy (and trucking). Since the importance of the consumer economy dwindles with rising inequality, basically, they don't care. If you can't afford to drive to the office, they imagine they'll hire a Mexican willing to walk 20 miles a day. Or whatever.

They just don't care.

And there's no shortage of hydrocarbons. Venezuela is sitting on tons of heavy crude, and Canadian tar sands dwarf existing stocks. Granted, the price of extraction is higher, but it could be done profitably at $50/barrel or so. So, peak oil is a mirage. The real problem is that we're destroying the planet by burning it.

And the big money people don't care, because they'll always be able to hire people willing to maim and kill anyone who gets in the way.

Or so they imagine.

Anyway, oil prices are an old story. Whatever set off the current panic is completely unrelated to that. Oil stocks were down, now recovering.
Charles, we can't even pump the most easily-attainable oil out of the ground for $50 a barrel.

While there are tar sands and shales loaded with oil, you inadvertently make a point for me: it takes an enormous amount of natural gas energy to obtain oil from these deposits, and you've seen what has happened to the price of natural gas these past few seasons.

Peak oil isn't just a problem, it's the problem, because everything in the global economy is hedged on cheap oil.

We don't have to go all the way down the supply curve before huge problems will arise.

Of course the rich couldn't care less. But we have about thirty years' worth of oil left, and our leaders are not planning for this.

Nobody is.
Only the US would be seriously harmed by a jump in oil prices, shrimplate. Japan has been preparing for this for years. Europe, not quite as much.

Remember, there's lots of coal for electric power. Oil is only important in three areas: transportation, agriculture, and chemicals.

I agree with you that tar sands are not yet commercially feasible. But heavy oil is economically feasible at $22/barrel.

Another big energy source is methane clathrates. We might have to develop those to prevent more global warming.

(I'm under par today, and can't carry the conversation well. Maybe we could start a thread and have a full bore debate? It's an interesting topic.
It's reasonable to assume that large swathes of the global economy will be sucker-punched as oil prices leap-frog upwards.

China, for example, has seen its oil imports increase by 40% in the same year that oil production remained flat (2005.) That's unsustainable.

Great Britain has some North Sea oil fields depleting on a 50% arc, indicating that soon they will be completely drained.

There was discussion of England going to a 3-day workweek to save on natural-gas industrial heating costs.


The Ghawar oilfields in Saudi Arabia are now pumping out 90% seawater, used to enhance recovery.

Europe has no oil of its own, but France, for example, has at least led the charge with electricity production from its many nuclear facilities.

I am obviously far more pessimistic than you are, Charles, regarding peak oil and the global economy.

But if there is hope for civilization, and I believe that there is, it hinges far more on people like you than it does on the Bush family evil empire.
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